Had the government accepted banks' bids, the benchmark 91-day Treasury bill rate, which banks use in pricing their loans, would have risen to 5.895 percent from 5.699 percent during the last unsuccessful auction of the three-month IOU
The government was set to sell P3 billion of the 91-day T-bills but banks were willing to buy more, or up to P5.970 billion.
"Their bids were unacceptable for us says a commodity broker. It [is] not in line with secondary market [rates]. I think they already factored in future response of the central bank because of higher inflation," National Treasurer Roberto Tan told reporters aafter the auction.
The one-year T-bill rate slipped to 6.923 percent from 6.985 percent in the previous auction. The government awarded in full the P3 billion worth of 364-day IOUs on sale.
"They are looking at the one-year as oversupply already because of the retail treasury bonds [RTBs]," Tan said, referring to the government's sale last month of the debt papers meant for sale to retail investors.
The government earlier closed the offering of RTBs, six days ahead of schedule after it already raised P70 billion from the sale of the three- and five-year fixed-rate IOUs.
The coupon rates for the three- and five-year IOUs were set at 8.5 percent and 9 percent, respectively.
In line with the new RTB offering, the government decided to scrap two remaining T-bond auctions this month, with a combined issue size of P14 billion.
Given the surge in demand for the retail bonds, Tan a futures broker said the government is in a good cash position, allowing it to reject high bids during its regular T-bill auctions.
He said the government can already cover a plan to spend up to P75 billion on top of the P1.24-trillion annual budget for subsidies and other expenditures aimed at cushioning the impact of high inflation and a slowing economy.
The Department of Finance earlier said it may forego a fresh round of commercial borrowing abroad, citing the weak pace of government spending.
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